Salary packaging handbook Exempt

FLEET MANAGEMENT toyotafleetmanagement.com.au TRUSTED FIGURES IN FLEET Contents

Introduction 3 Important information 20

What is salary packaging? 4 Maintaining your salary package 21

What items can be salary packaged? 5 Changing your salary package 21

Why salary package? 6 Payments and reimbursements 21

What expense items can be salary packaged? 7 Terminating your salary package 22

TFM Transaction Card 7 Terminating your novated lease 23 Expense items 8 Other considerations 24 Meal Entertainment/ Accommodation 9 Novated leases 9 Reportable fringe benefits 25 What is a novated lease? 9 TFM Privacy Policy 26 Reasons for choosing a novated lease 10 The benefits of novated leasing 10 Employer Policy 26 Purchasing a vehicle 10 What’s included in a novated lease? 10 Novated lease inclusions 11 Budgets for your vehicle 13 Residual 13 Leaving your employer 15 Fringe Benefits Tax 16 Sale and leaseback 17 FBT-exempt items 18 Salary packaging handbook

With over 30 years’ experience in financial Salary packaging is an agreement services, Toyota Fleet Management (TFM), between you and your employer, is a specialist in salary packaging, including which allows you to sacrifice novated leasing. We handle salary packaging some of your salary in return for more than 350 employers across Australia, for a benefit. taking care of the details and making the process easy from start to finish. By paying for this benefit with pre-tax dollars, you reduce This handbook has been prepared to outline all you need to know about our salary packaging program. A copy can be accessed via your employer’s your taxable income, therefore HR department and/or intranet, or you can contact the TFM team if you increasing your disposable income. have any questions.

For more information, call us on 1300 888 870 or visit toyotafleetmanagement.com.au

3 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 4 What items can be salary packaged? Why salary package?

TFM provides a full range of salary packaging benefits including: When you salary package using pre-tax salary, you reduce your taxable income, which reduces the Pay As You Go (PAYG) tax you are required to –– Novated leases pay. To offset this reduction in PAYG tax, the Australian Taxation Office –– Expense items including mortgage, rent, TFM Transaction Card, (ATO) levies another tax called Fringe Benefits Tax (FBT). school fees and more As an employee of a Public Benevolent Institution (PBI), you are entitled –– Meal entertainment/accommodation to an FBT exemption of $15,900 per annum, that can be salary packaged –– Work related items exempt from Fringe Benefits Tax (FBT) towards expense items. like laptops, mobile phones, lounge memberships and portable This means you can salary package $15,900 from your pre-tax salary each electronic devices (PEDs) FBT year (April 1 – March 31), reducing your taxable income by this amount –– Extra superannuation contributions and providing you with substantial benefits.

–– Other deductible items.

Please check your TFM employer policy page for any exclusions. Please note that benefits being provided internally through your employer, such as a company car or novated lease, will reduce the threshold of $15,900 available for salary packaging.

5 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 6 What expense items can be salary packaged?

You can package a range of items up to the value of $15,900, including Expense items e.g. mortgage, rent or school fees your mortgage, rent, personal loan, novated lease or school tuition fees. When salary packaging an expense item, you simply need to provide You may also choose our convenient TFM Transaction Card to package evidence that the expense exists (e.g. a copy of your mortgage or personal everyday living expenses such as groceries, bills and clothes. loan contract). TFM Transaction Card These expenses can be packaged up to the threshold amount of $15,900, and you need to prove that the expense is equal or greater than this The TFM Transaction Card is a specially designed VISA debit card that amount. Once proof is provided, a regular pre-tax deduction will be set up provides a quick and easy way to pay for everyday items. It can be used from your pay and sent to TFM. TFM will then reimburse this money to your globally, anywhere VISA is accepted. nominated bank account. The card can only be used for in-store purchases or payments via phone banking and cannot be used for cash withdrawals. Direct debits cannot be set up from the transaction card. How Sally benefits Each pay period, you sacrifice an agreed amount. TFM allocates this amount to your transaction card account. These funds are then available for use on Sally decides to salary package $15,900 towards her mortgage your card. Transactions will be rejected if there are insufficient funds in the payments. She provides TFM with her mortgage statement and account. As a cardholder, you can check your credit balance at any time. her salary packaging arrangement is set up. Each pay period, her employer deducts money from her pre-tax salary, and sends Any balance on the TFM Transaction Card must be spent by 31 March this amount to TFM. TFM then withholds administration fees each year. Balances remaining will reduce the $15,900 available for the and reimburses the remaining funds into Sally’s nominated bank next FBT year. account. Sally can then use these pre-tax funds to pay for her mortgage, while receiving savings in PAYG tax.

How Daniel benefits

Daniel decides to salary package $15,900 to the TFM Transaction Card. TFM helps Daniel to set up this arrangement and orders the card. Each pay period, Daniel’s employer deducts money from his pre-tax salary and sends this amount to TFM. TFM then transfers these funds to Daniel’s transaction card account. Daniel is then free to use this card for purchases anywhere VISA is accepted, while receiving savings on PAYG tax.

7 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 8 Meal Entertainment/Accommodation (EFLE) Reasons for choosing a novated lease –– Perhaps you’re in the market to purchase a new or used vehicle The Meal Entertainment/Entertainment Facility Leasing Expense (EFLE) benefit lets you purchase meals, drinks and accommodation to the value –– Maybe you have an existing vehicle that you own outright or owe of $2,650 with your pre-tax salary without paying PAYG tax. You can use finance on pre-tax dollars when you dine out with your family or take a holiday. This –– Or you might drive high or low kilometres – either way, a novated lease benefit can be packaged in addition to the $15,900 FBT threshold amount, can be a good option. and is made even easier by the convenience of the TFM Salary Packaging Meal Entertainment Card. The TFM Salary Packaging Meal Entertainment The benefits of novated leasing Card is a VISA debit card and is used solely for Meal Entertainment/ Novated leasing is a popular finance option for many Australian employees. Accommodation (EFLE) expenses. The benefits include: EFLE refers to accommodation associated with the hire/lease of a hotel –– Savings on GST – you do not pay the GST on the purchase price of the or motel room, rented holiday house or on-site caravan and more. vehicle (to the maximum amount claimable) or any of the running costs Any balance on the TFM Salary Packaging Meal Entertainment Card must –– Savings on PAYG tax – you sacrifice some or all of the deduction in be spent by 31 March each year. Balances remaining will reduce the $2,650 pre-tax salary, therefore reducing your taxable income, providing you available for the next FBT year. with substantial benefits.

Novated leases What’s more, when you have a novated lease with TFM, we manage your vehicle’s expenses for you, so you don’t have to worry about A novated lease is a convenient, tax-effective way to purchase a new being out of pocket. or used vehicle. You sacrifice some of your salary in return for a fully maintained vehicle, including the finance component, fuel, maintenance, Purchasing a vehicle tyres, insurance and registration. You can purchase a new or used vehicle through your own preferred supplier, or you can use TFM’s vehicle purchasing network to source What is a novated lease? a new vehicle at a competitive price, at no cost to you. A novated lease is a standard lease contract arranged via a financier, To be eligible for salary packaging, the vehicle you are looking to purchase with a secondary document attached called a novation agreement. must be a passenger vehicle and cannot have a carrying capacity of more This agreement transfers some of the lease obligations to your employer. than one tonne. Once the novated lease is in place, it allows your employer to deduct money from your salary, which is then sent to TFM to be used towards the running If you are looking to purchase a vehicle now or in the future, contact costs and finance of your vehicle. TFM first.

What’s included in a novated lease? One of our Novated Lease Consultants will provide you with a quote based on the vehicle you are looking to purchase. This quote will factor in all the running expenses of the vehicle and show your annual tax savings. Your dedicated novated lease consultant will also run through what your novated lease will cover.

9 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 10 Novated lease inclusions

Term Meaning Term Meaning

–– You will be given a Motorpass fuel card to be used for –– As the vehicle is insured in your name, the renewal notices all fuel purchases. will be sent to you by your insurer. Providing there is adequate time before payment is due, you can send your –– TFM will be invoiced directly for all your fuel transactions. Insurance insurance renewal directly to TFM and we will pay the cost –– Each vehicle has its own fuel card. If you have two vehicles for you. Alternatively, you can pay for the renewal yourself Fuel packaged, then two cards are required. and send in the receipt to TFM for reimbursement.

Please note that fuel cards will be cancelled as soon as TFM is notified of your termination of employment and/or lease, so –– When you have any out of pocket vehicle expenses, accounts can be finalised. Any expenses incurred after this time TFM will reimburse you for these costs. should be paid by the employee. –– Reimbursements can only be processed when there are sufficient funds in your salary packaging account. –– Your novated lease arrangement covers costs for all Expenses –– The following vehicle expenses cannot be servicing, repairs, tyres and batteries. Where an authorised salary packaged: service centre is used, TFM will be invoiced directly for these expenses and trade prices for parts and labour will –– Road tolls and e-TAG expenses Maintenance be charged. –– Traffic infringement notices and fines –– Employees choosing to use a non-authorised supplier –– Accessories that are added to the vehicle after purchase. will need to pay for the expense directly, and submit a claim to TFM for reimbursement.

–– Your registration renewal will be sent to you directly from your state or territory office as the vehicle is registered in your name. You can either:

Registration –– Send your renewal directly to TFM. Providing there is adequate time before payment is due, TFM will pay this cost directly for you. –– Pay for the renewal directly and send in the receipt to TFM for reimbursement.

11 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 12 Budgets for your vehicle

When a TFM Novated Lease Consultant prepares a quote, they will set Your options annual budgets for the running costs, based on the type of vehicle and number of kilometres you plan to travel. When the residual value falls due, you have three options:

It’s important to remember that money not spent against these vehicle 1. Trade in your vehicle and enter into a new novated lease budgets remains your money. So, if at the end of your lease you have a for another vehicle. credit balance, the funds will be returned to payroll and paid to you in If your trade-in amount is more than your residual value after-tax salary. (incl GST), this money is paid directly to you and cannot During your lease, if you spend more than what has been allocated to be used to offset the finance amount of your new vehicle. your vehicle budgets, TFM will contact you to increase your regular salary Alternatively, you must pay any shortfall between the trade-in deduction to account for the overspend. If, at the end of your lease, price and the residual value. you have a negative balance, you will be required to cover this shortfall. 2. Refinance the residual value (excl GST) that is owed over a Residual period that suits you. You can then continue with the salary packaging benefits. At the end of your novated lease you will have a residual value owing. Minimum residual values are determined by the Australian Tax Office (ATO) 3. Purchase your car. guidelines, as shown in the table below: You may wish to purchase the car you have been leasing with us. This is fine, and we are on hand to make this as simple Lease term Residual value % of AMT financed as possible for you. You can make an offer to buy the car from TFM for an amount no less than the residual value, plus GST, 1 Year 65.63% as agreed when you took out your lease. We will give you instructions on how to pay. The benefit of the novated lease 2 Years 56.25% and salary packaging would then cease.

3 Years 46.88%

4 Years 37.50%

5 Years 28.13%

13 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 14 Leaving your employer Fringe Benefits Tax A novated lease is a flexible product that can be transferred to another When you salary sacrifice with a pre-tax deduction, you reduce your taxable employer if they allow salary packaging. income, reducing the amount of PAYG tax you pay. To offset this reduction in PAYG tax, the ATO levies another tax called Fringe Benefits Tax (FBT). So, if you’re leaving your employer, the first thing you need to do is contact TFM to discuss your options. To ensure you do not exceed the FBT limit ($15,900), employees that enter into a novated lease will see a reduction in the amount they can Lease payments for your vehicle, fuel cards and insurance are all linked to salary sacrifice towards an expense item unless they make an after-tax your employer. If you leave your company, your employer will stop making contribution towards the FBT. payments to TFM, which means TFM will need to cease making your lease and insurance payments and your fuel cards will need to be cancelled. If you sacrifice funds towards a novated lease, the amount of $15,900 will be reduced. The reduction will depend upon the value of the vehicle. A TFM consultant will be able to give you further information upon request.

Your options If you exceed the $15,900 limit, full FBT is charged.

When you leave your employer you have three options.

1. Cease your salary packaging arrangements and continue Remember, you don’t need to be a high income earner or drive a paying the monthly lease rentals via a direct debit. All of large number of kilometres to benefit from a novated lease. the car’s running costs need to come out of your own pocket, including GST.

2. Re-novate your lease to a new employer and continue to salary package if they have a provider.

3. Pay out the finance contract early and own the vehicle outright.

15 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 16 Sale and leaseback FBT-exempt items You can also consider a sale and leaseback on a vehicle that you currently The following items can be salary packaged and are exempt from FBT, own. This is where TFM can buy your vehicle from you at current market if used primarily for business purposes: value, and lease it back to you to receive savings on PAYG Tax and GST savings on the running costs. –– Laptop computer –– Mobile phone –– Calculator –– PEDs* –– GPS –– Airport lounge membership –– Briefcase –– Tools of trade.

You can salary package one of each of the above items per FBT year (April 1 – March 31). A business use declaration (provided by TFM) will be required for each item packaged.

When you salary package any of the above items, there are two main benefits:

1. When using pre-tax salary, you reduce your taxable income, providing you with substantial PAYG tax savings 2. You also save the GST payable on any of these items. Your employer can claim back the GST paid on these items and the savings are passed back to you via your salary package.

The total purchase price of the listed items, can be salary packaged over one or more pay periods.

* Examples of portable electronic devices include a mobile phone, calculator, personal digital assistant, laptop, portable printer and portable global positioning (GPS) navigation receiver.

17 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 18 How Emma benefits Important information

Emma requires a laptop primarily for her employment. Salary packaging through TFM is organised at the request of She chooses and pays for a laptop valued at $1,500, and sends you, the employee, not the employer. in her payment receipt to TFM. To enquire about salary packaging, please call TFM After speaking to a TFM consultant, Emma decides to salary on 1300 888 870 and ask to speak to one of our dedicated package her laptop over one pay period. Emma only needs to consultants. They will provide you with information detailing sacrifice $1,364, as the GST of $136 is credited back to her via the proposed structure. her salary package. As the employee, the choice of benefits is up to you. Your Her employer deducts this $1,364 from her pre-tax salary and employer takes no responsibility for the tax effectiveness sends this amount to TFM. TFM will then reimburse $1,500 into of the package chosen. Emma’s nominated bank account. Packaging does not affect employer superannuation By salary packaging her laptop, Emma has gained substantial contributions, long service leave, or holiday pay. After salary PAYG tax savings and also saved the $136 of GST on her laptop. package deductions have been made, the remaining gross salary will be paid as usual through the payroll system, with PAYG tax deducted at the applicable rate.

Please check your TFM employer policy for the full list of items available for Before making a decision, you should consult your independent salary packaging, including associated fees. legal, taxation and financial advisors who can advise you about your personal circumstances.

19 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 20 Maintaining your salary package Terminating your salary package

TFM takes care of the management of your salary package. You can access You, the employee, are responsible for notifying TFM and your employer your account and transaction information at any time using our secure of your intention to cease salary packaging. You must give at least one online system. calendar month’s notice.

To close your salary packaging account, you must complete Changing your salary package a Termination Form. Your employer is also required to notify TFM immediately, should your employment cease for any reason. This will allow TFM time to finalise You can call TFM on 1300 888 870 to review and amend your salary outstanding payments and collect any monies owing, prior to your packaging arrangement at any time, at no cost. departure. A final statement from TFM detailing the status of the package will then be forwarded to you. Payments and reimbursements

All regular payments (e.g. lease payments) will be made automatically by TFM on an agreed date each month, either directly or by reimbursement. All irregular or annual payments to third parties (e.g. mobile phone, car registration) will be reimbursed to you by TFM.

Please note

–– TFM will not reimburse you for the cost of any packaged expenses without proof of payment

–– Reimbursement of irregular expenses will only be made where there are sufficient funds available in the salary package account

–– The employee (not a third party) must make the request for reimbursement using the TFM Reimbursement Claim Form.

21 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 22 Terminating your novated lease Other considerations

On leaving your employment, any novation agreement signed by your Salary packaging can be a tax-effective method of paying for some goods employer becomes null and void and removes all future responsibility and services that you purchase in your normal daily life, and may increase on behalf of the employer. your take home pay substantially.

If you want to continue the lease agreement after the novation agreement Tax laws, including FBT legislation, can change and affect salary packaging is terminated, you will need to make the lease payments from your own arrangements. As the employee, you indemnify the employer against any personal account via direct debit. FBT liability in this program and are responsible for all costs associated with salary packaging including: If you prefer to terminate your lease, you need to request a payout figure from the finance company (via TFM). Payment of the lease balance must be –– Cost of all packaged benefits made directly by you to the finance company. –– FBT To close your salary packaging account, you must complete a Vehicle –– Repayment of any deficit package balance within 30 days Termination Form. You need to include closing odometer reading/s, –– Package administration fees to enable TFM to calculate any FBT payable up to the date of termination. –– Legal or other agents’ costs and expenses/disbursements incurred On receipt of your final fuel account, TFM will then close down and reconcile by TFM and/or the employer for any debt recovery action against your package. the employee. If there is a credit balance in your packaging account after the final expenses have been deducted, the amount will be paid back to you via your employer’s payroll (less the applicable PAYG tax).

If there is a deficit in your packaging account after the final expenses have been calculated, you will be advised and will need to repay any outstanding amounts.

23 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 24 Reportable fringe benefits TFM Privacy Policy

If you decide to salary package and you are receiving support from Please refer to toyotafleetmanagement.com.au/privacy for a full copy of Centrelink or any other state or federal government agency (e.g. HECS/ our Privacy Policy. HELP, child support payments, Medicare levy surcharge), it is your responsibility to let them know. These organisations require full disclosure of your income and packaged benefits, and based on this information, Employer policy the payments you receive from them may be affected.

The grossed up FBT value of your salary packaged benefits is a reportable For your employer’s salary packaging policy, please call 1300 888 870, item on your payment summary, enabling government agencies to email [email protected] or speak with your employer. determine the full value of your remuneration.

The following benefits may be affected: How to contact TFM –– Medicare levy surcharge Phone: 1300 888 870 –– Mature age worker tax offset –– Deduction for personal superannuation contributions Email: [email protected] –– Tax offset for eligible spouse superannuation contributions –– Super co-contribution –– Higher Education Loan Program (HELP) and Financial Supplement repayments –– Child support obligations –– Entitlement to certain income-tested government benefits.

25 Salary Packaging Handbook – Exempt Salary Packaging Handbook – Exempt 26 Contact the trusted figures in salary packaging 1300 888 870 toyotafleetmanagement.com.au

Toyota Fleet Management is a division of Toyota Finance Australia Limited ABN 48 002 435 181. AFSL and Australian Credit Licence 392536. TFM073 (02/18)